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PROTECT YOUR INVESTMENT: Buying a New or Used Home

Most homeowners view their house as their "Kingdom". This is not surprising since it is the biggest investment most people ever make. In fact, the average amount of a mortgage is currently $250,000. Unfortunately, not all houses are constructed equally. The good news is that there are ways to protect your investment when buying a new or used home.

New Homes
When purchasing a newly constructed home, it is advisable to ensure that your home is protected by a New Home Warranty Program. Although there are many variations in what each Program provides, the builder is usually responsible for providing you with "bumper-to-bumper" coverage for the first year. The Program then provides an additional five years of structural coverage on your home. (The length of structural coverage will vary according to which Program your builder subscribes to.)

What most homeowners do not know is that the Warranty Program the builder deals with usually holds several thousand dollars of the builder's money in trust for the duration of the home warranty. This money is held to ensure that warranty repairs are completed in a timely and efficient manner. In other words, if there is a dispute between the homeowner and builder regarding repairs, the Warranty Program will determine who will bear the cost.

Normally, within the first year, builders will repair any damage resulting from the settling of the home. This may include nail pops, cracks between the walls and ceiling or any separated seams in the drywall. However, they are not responsible for any damages or wear-and-tear incurred by the homeowner. For example, they will not repair damage to concrete caused by using salt as opposed to de-icer. They also will not repair damage to your foundation if you forget to position your rainspouts correctly or landscape your yard so the water is flowing towards your basement.

If your new home is not covered by a New Home Warranty Program, the principle of "buyer beware" applies.

Used Homes
If you are purchasing a used home that is older than five years, chances are there is no warranty on the house. In this case, "buyer beware" applies. This phrase means it is your responsibility to ensure the home is in good condition prior to buying it. The best way to protect yourself in this situation is to hire a qualified inspector to thoroughly examine all aspects of the home. In the past, purchasers who have failed to do this have been left with little or no legal recourse.

To illustrate how "buyer beware" applies, consider walking into a home that you are very interested in buying only to see an awkwardly positioned table off to the side of the living room. You buy the home, the Vendors move out and you see that where the table used to be is a large ink stain. Who is responsible for replacing the carpet? You are. Under the principle of "buyer beware", you or an inspector should have moved the table to ensure the carpet underneath was undamaged.

There are a few circumstances where liability has been found against third parties. These include situations where the Vendor has failed to disclose a defect, a Realtor has knowingly misrepresented the property and where faulty construction has resulted in a "dangerous defect" in the home. In these cases, it would be wise to consult with a lawyer.

Overall, if buying a used home, don't be afraid to visually inspect the home thoroughly before signing the Purchase Agreement. Also ensure that you hire a certified inspector to advise you of any hidden defects in the home. A few hundred dollars could save you several thousand dollars in the long run!

By Lani Rouillard
August 3, 2005